August 4, 2009

Regional Focus: Growing Internet usage in the Middle East and North Africa

Analyst Insight by Media Eghbal.

Iran's June 2009 “Twitter Revolution”, in which Internet media were used to mobilise protests against President Ahmadinejad's disputed re-election, has focused attention on the growing use of the Internet in the Middle East and North Africa (MENA).

Access to the Internet has expanded dramatically since 2003, benefiting consumers and improving the business environment.

While governments are concerned about the Internet's political use, they understand its potential to boost the economy.

Key points

Internet access in the Middle East and North Africa has expanded rapidly since 2003, reaching 85.5 million users in 2008, or 5.2% of the world's users;

Internet users in the region are typically under 35 years old and predominantly male, although there are indications that the digital gap between men and women is narrowing;

The young profile makes Internet users a promising consumer market as they are more likely to be influenced by global consumer trends. The dominance of Arabic is an advantage as it allows addressing a wide audience in many countries;

The region's business environment has benefited from the advance in Internet access. E-government initiatives have helped to cut red tape, and increased transparency and information availability make it easier to do business in the region;

While governments in the region understand the importance of the Internet, they are concerned over its use by opposition movements. Censorship and crackdowns on bloggers have become frequent.

The rise of the Internet in the Middle East

While the Internet was slow to arrive in the region in the 1990s, its development has been rapid:

The number of Internet users in MENA grew from 16.0 million in 2003 to 85.5 million in 2008. Their share of the world's total users rose from 2.0% to 5.2% over the same period;

Iran leads the region with 41.1 million Internet users as of 2008. Egypt came second in the same year with 12.6 million. When examined relative to population size, the widest access to the Internet was found again in Iran (57.0 users per 100 inhabitants), followed by the United Arab Emirates (56.4 users per 100 inhabitants);

Internet users in the Middle East and North Africa: 2003/2008

‘000 / per 100 inhabitants

Source: Euromonitor International from International Telecommunication Union (ITU).

The spread of the Internet is part of a wider trend of growing access to media and communications in the region. In the 1990s and 2000s satellite TV systems and mobile phones became a standard household item even in poor countries in the Middle East.

Opposition movements have used the Internet to mobilise and coordinate protests, most famously in Iran's June 2009 “Twitter Revolution” following the disputed presidential elections, but also in other places such as Egypt (April 2008) and Bahrain (2005-2006). The Internet has been used by a variety of groups with diverse agendas, from secular liberals through to trade unionists and Islamists;

New media has contributed to the advancement of civil society and promoting accountability. In 2008 Egypt's Prime Minister Ahmad Nazif surprised Egypt's internet community by leaving a comment on an opposition blog. In his comment, Nazif responded directly to criticism regarding the education system, while praising freedom of speech in the blogosphere;

However, governments have also responded with a crackdown on opposition websites and applying censorship. The strictest censorship is practiced in Saudi Arabia, which in 2009 ordered Internet cafes to install hidden surveillance cameras and keep a record of names of customers. However, Internet users have generally been able to circumvent censorship.

Internet user profiles

Studies of Arab and Iranian blogosphere, conducted by Harvard University in 2008 and 2009, gives indication of the demographic profile of Internet users. Arab and Iranian bloggers were overwhelmingly young (under the age of 35). Most bloggers were male, while the share of women among younger bloggers (under 25 years old) was almost equal to men, which suggests that the digital gap between men and women is closing;

Judging by blogs, Internet users seek primarily content relating closely to their country, rather than regional issues. Thus, bloggers tend to cluster according to country with interests varying between politics, religion and culture.

Users benefit from the Internet as consumers and for their professional careers:

Online retailing offers consumers greater choice and convenience. Internet retailing is developing rapidly in the region, especially (though not exclusively) in the small Gulf states such as Kuwait and UAE. From international brand megastores offering electronics and entertainment products, to family-owned sweet shops, businesses are expanding their online presence to capture the growing market;

Internet literacy improves chances in the labour market. In addition, the Information and Communications Technology (ICT) sector is growing across the Middle East and North Africa, providing employment opportunities in countries such as Jordan and Egypt, which suffer from high unemployment;

Boosting Internet skills increases human capital and helps to promote knowledge-based economic sectors. This could assist to narrow regional inequalities between resource-poor countries, such as Egypt, Jordan and Morocco on the one hand, and the hydrocarbon-rich economies of the Gulf on the other.

Business environment

The advance of the Internet is improving the business environment and creates business opportunities:

Many countries in the Middle East and North Africa suffer from a difficult business environment, with excessive red tape and cumbersome procedures. In the 2009 World Bank Ease of Doing Business survey, five of the region's major economies – Egypt, Jordan, Algeria, Morocco and Iran – ranked in 101st place and below, out of 181 economies;

Governments across the region are investing in e-government. According to a United Nations survey from 2008, UAE, Jordan, Kuwait, Saudi Arabia and Egypt all substantially improved their e-government services between 2005 and 2008, and their level of readiness was above the global average. New e-government services in Middle East countries included online consultation, forms downloading and submission, and online payments for government services;

E-Government readiness in the Middle East and North Africa: 2005/2008

Source: UN. Note: E-government readiness index examines the availability of government services on the internet and the extent of e-participation of citizens and businesses. 1 = highest possible readiness, 0 = lowest level of readiness.

The lack of transparency and open access to data has been a major disadvantage for the region's business environment. The Internet has improved access to data, which is available both from government websites and from a wide variety of private and business sources;

The Internet allows foreign businesses and investors to transcend borders easily, to form contacts and alliances with local business, and to manage from afar distribution networks across this large region. The Internet also makes it easier for multi-national companies to train staff in distant locations through e-learning. In Saudi Arabia, the e-learning industry was estimated at US$125 million in 2008;

The dominance of Arabic as the written language of up to 279 million in the region 2008, is a major advantage. The Internet allows businesses and online retailers to easily address Arab consumers in many countries without worrying about language barriers. At the same time, a one-size-fits-all approach would not always work, as internet cultures of different Arab countries vary considerably.

Economic growth in the Middle East and North Africa is expected to moderate amid the global recession, yet remain positive. Real GDP growth in the region is expected to fall to 2.1% in 2009 from 5.9% in 2008, and recover to 3.7% in 2010;

The Internet could prove an effective way to reach consumers in the Middle East and North Africa, due to the growing digital literacy among youth. Jordan, for example, is aiming that by 2011 Internet users would make up 50.0 per 100 inhabitants, from 21.8 per 100 inhabitants in 2008. Online marketing and retailing are set to expand to meet growing demand;

The region's authoritarian governments are expected to continue their attempts to crackdown on the use of the Internet as a political tool. Yet the wider benefits of the Internet to the economy and its general use by the population mean that the spread of Internet access will not be reversed.